Publication Type

Journal Article

Version

acceptedVersion

Publication Date

11-2018

Abstract

An important question in mechanism design is whether there is any theoretical foundation for the use of dominant-strategy mechanisms. This paper studies the maxmin and Bayesian foundations of dominant-strategy mechanisms in general social choice environments with quasi-linear preferences and private values. We propose a condition called the uniform shortest-path tree that, under regularity, ensures the foundations of dominant-strategy mechanisms. This exposes the underlying logic of the existence of such foundations in the single-unit auction setting, and extends the argument to cases where it was hitherto unknown. To prove this result, we adopt the linear programming approach to mechanism design. In settings in which the uniform shortest-path tree condition is violated, maxmin/Bayesian foundations might not exist. We illustrate this by two examples: bilateral trade with ex ante unidentified traders and auction with type-dependent outside option.

Keywords

Dominant-strategy mechanisms, Duality approach, Linear programming, Maxmin foundation, Mechanism design, Robust mechanism design

Discipline

Economic Theory

Research Areas

Economic Theory

Publication

Journal of Economic Theory

Volume

178

First Page

294

Last Page

317

ISSN

0022-0531

Identifier

10.1016/j.jet.2018.10.001

Publisher

Elsevier

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jet.2018.10.001

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